Dispute-related enquiries in construction up 68%

By

Sona Nambiar

PublishedTuesday, January 13, 2009

Over the past two months, dispute-related enquiries from the construction industry have risen by 68 per cent due to the liquidity crunch, said the Dubai office of the international law firm Clyde & Co.

The situation has not yet reached courts but there is also a potential threat to the industry and to the banking sector in the form of unscrupulous cash-strapped developers making premature demands on the performance bonds made by contractors, which the bank will be obliged to pay, it said.

However, Michael Grose, a partner at the firm, said contractors are coming up with solutions such as value-engineering to deal with the current liquidity crunch. "The industry is also beginning to respond with novel ideas, where in case of default of payments they might take a floor or five floors as payment. Or the developer will discuss the budget for the next 12 months with the contractor and ask them to slow down progress to match the money on hand."